The High Court has dealt a blow to the government’s revenue collection plans after it declared the phytosanitary inspection fees charged on coal imports illegal and unconstitutional.
The charge, managed by the Kenya Plant Health Inspectorate Service (Kephis), took effect on December 1, 2024. It applied to goods transported by sea and air at a rate of 50 cents per kilogramme, with importers required to pay another Sh500 for every phytosanitary certificate.
But in a judgment delivered in Nairobi, the court quashed the decision by the Kephis to increase fees from 16 cents to 50 cents per kilogramme. The court also barred the state from continuing to levy or collect the charges, citing a lack of legal foundation.
"The decision by the respondents to levy phytosanitary inspection fees on coal imports has no legal basis and violates the Constitution," the court ruled in response to a petition filed by Shaz Ventures Limited, Beyond Continents Logistics Limited, and others.
The court further noted that the charges were imposed without statutory backing or public participation, as required by law.
Additionally, the court issued an order prohibiting the state from charging, levying, demanding, or collecting phytosanitary service fees on imported coal, effectively ending the practice.
The petitioners, coal importers, had argued that coal is neither a plant nor a plant product and therefore falls outside Kephis mandate. Court documents revealed that the importers considered the fees arbitrary, sharply increasing import costs, and exposing businesses to unpredictable regulatory actions.
They sought multiple orders, including a declaration that the collection of phytosanitary inspection fees on coal imports was unlawful, null, and void.
They also requested the court to quash the July 2024 fee increase and impose a permanent prohibition on future collections of such fees.
"The respondents acted beyond their statutory mandate by attempting to regulate coal imports through phytosanitary fees," the petitioners argued, describing the move as "an unlawful tax disguised as an inspection charge."
The court agreed, ruling that Kephis’ decision failed constitutional tests of legality and procedural fairness. It emphasised that Kephis derives its authority from the Plant Protection Act, which pertains only to plants, plant products, and regulated articles capable of spreading pests—categories that exclude coal.
"The respondents failed to demonstrate how coal, a mineral product, poses a phytosanitary risk requiring inspection under existing laws," the judge stated.
The ruling also criticised the government for failing to conduct public participation before raising fees, noting that affected stakeholders were not consulted despite the financial impact on importers and consumers.
"The respondents acted unlawfully and disregarded constitutional principles," the court said while awarding legal costs to the importers.
The decision has immediate implications for energy producers and industrial users reliant on imported coal, particularly amid rising input costs due to currency fluctuations and high logistics expenses.
Kenya’s power producers and manufacturers have long warned that unpredictable regulatory charges destabilise pricing and discourage long-term supply contracts.
Background details reveal that Kephis is legally mandated to prevent the introduction and spread of plant pests and diseases through inspections of plants, plant products, and regulated articles.
The petitioners contended that the fee hike lacked adequate public consultation or legal authorisation.
The ruling comes amid heightened scrutiny of regulatory costs in Kenya, especially in energy and manufacturing. Coal imports primarily serve cement manufacturers and power producers, making additional fees consequential for industrial pricing.
In its defense, the government argued that the fees supported inspection services and environmental safeguards. However, the court deemed this justification insufficient without explicit legal backing.
Ultimately, the court issued a permanent injunction prohibiting the government, Kephis, or any other agency from imposing phytosanitary inspection fees on coal imports.
